sentimenTrader Blog


2017-02-21 | Eric Brown | Comments

Currently, there are 7 Stock indicators at Pessimistic Extremes and 56 Stock indicators at Optimistic Extremes. The tables below display stock market indicators that are at Very Optimistic, Extremely Optimistic, Very Pessimistic or Extremely Pessimistic levels. Note: These tables contain only indicators from the Stocks section of the site. For the tables below, you can click through to each chart by […]

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2017-02-14 | Eric Brown | Comments

Currently, there are 4 Stock indicators at Pessimistic Extremes and 51 Stock indicators at Optimistic Extremes. The tables below display stock market indicators that are at Very Optimistic, Extremely Optimistic, Very Pessimistic or Extremely Pessimistic levels. Note: These tables contain only indicators from the Stocks section of the site. For the tables below, you can click through to each chart by […]

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2017-02-10 | Jason Goepfert | Comments

It seems at the moment as though we’ve entered another phase of the Nihilism Rally. Almost everything we’ve looked at in recent weeks has suggested a pause at best, and yet we continue to reach new highs. Nothing matters. At least not the “somethings” that we monitor. At the risk of adding yet another match […]

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2017-02-03 | Jason Goepfert | Comments

With a (mostly) better-than-expected Nonfarm Payroll (NFP) report, stock futures spiked higher and are estimated to open about 0.4% higher than yesterday’s close. We noted yesterday that the NFP report has a habit of occurring near market inflection points when stock prices are at/near a price extreme. Whether that’s due to the report itself or […]

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2017-02-01 | Eric Brown | Comments

Currently, there are 6 Stock indicators at Pessimistic Extremes and 48 Stock indicators at Optimistic Extremes.

The tables below display stock market indicators that are at Very Optimistic, Extremely Optimistic, Very Pessimistic or Extremely Pessimistic levels. Note: These tables contain only indicators from the Stocks section of the site. For the tables below, you can click through to each chart by clicking on the Chart name.

Pessimistic Extremes

Chart Last Close Last Update Sentiment
Number of IPOs
7.0
2016-12-30
Penny Stock Share Volume
72816200.0
2016-12-30
Penny Stock Dollar Volume
34629800.0
2016-12-30
Rydex Energy Services Assets
28.9
2017-01-31
Rydex Europe Assets
4.3
2017-01-31
Rydex Japan Assets
1.8
2017-01-31

Optimistic Extremes

Chart Last Close Last Update Sentiment
Smart Money / Dumb Money Confidence Spread
-49.0
2017-01-31
AIM (Advisor and Investor Model)
91.0
2017-01-27
% Showing Excess Pessimism
0.0
2017-01-31
% Showing Excess Optimism
39.0
2017-01-31
VIX
11.99
2017-01-31
SKEW Index
134.3
2017-01-30
QQQ Liquidity Premium
-30.0
2017-01-31
Fidelity Funds Breadth
85.0
2017-01-31
Equity Hedging Index
18.0
2017-01-27
Risk Appetite Index
96.0
2017-01-26
Equities as % of GDP
0.79
2016-09-30
Small Business Optimism
105.8
2016-12-30
Speculators Combo
97.0
2017-01-24
NASDAQ 100 Combo Hedgers Position
-17671000000.0
2017-01-24
DJIA Hedgers Position
-32978.0
2017-01-24
DJIA Mini Hedgers Position
-65956.0
2017-01-24
DJIA Combo Hedgers Position
-13133600000.0
2017-01-24
Russell 2000 Mini Hedgers Position
-82696.0
2017-01-24
Odd Lot Purchase Percentage
67.5747
2017-01-30
NAAIM Exposure Index
99.3
2017-01-25
Mutual Fund Cash Level
3.0
2016-12-30
Equity / Money Market Asset Ratio
4.11
2016-12-30
Retail Money Market Ratio
2.79
2016-12-26
NYSE Available Cash
-179194.0
2016-12-30
Penny Stock Transaction Volume
4984.0
2016-12-30
Insider Buy/Sell Seasonally Adj
-3.42
2017-01-27
Rydex Ratio
77.0
2017-01-31
Rydex Money Market %
17.0
2017-01-31
Rydex Bull/Bear RSI Spread
100.0
2017-01-31
Rydex Total Bear Assets
135.4
2017-01-31
Rydex Total Bull / Bear Ratio
10.5
2017-01-31
Rydex Banking Assets
78.4
2017-01-31
Rydex Biotechnology Assets
302.6
2017-01-31
Rydex Consumer Products Assets
299.9
2017-01-31
Rydex Financial Services Assets
72.6
2017-01-31
Rydex Leisure Assets
45.7
2017-01-31
Rydex Technology Assets
63.3
2017-01-31
Rydex Telecom Assets
49.5
2017-01-31
Rydex Transportion Assets
64.1
2017-01-31
Smart Money Confidence
17.0
2017-01-31
Dumb Money Confidence
66.0
2017-01-31
Hedge Fund Exposure
0.326
2017-01-26
Conference Board – Stocks
23.1
2017-01-31
% Showing Excess Optimism-Pessimism Spread
0.39
2017-01-31
QQQ Open Interest Ratio
2.039
2017-01-31
IWM Open Interest Ratio
3.0694
2017-01-31
Medium-Term Risk Levels
6.0
2017-01-31
Rydex Total Leveraged Bear Assets
50.5
2017-01-31

2017-01-30 | Eric Brown | Comments

For a the last month, we’ve provided two new social sentiment indicators for our premium users (see the announcement of these indicators here).

As we’ve previously written, these social sentiment indicators are derived int he following manner:

Social Sentiment is sentiment derived from performing automated natural language processing on messages collected from Twitter. Messages that mention a symbol (SPY for example) are collected and analyzed and given a rating of ‘bullish’, ‘bearish’ or ‘neutral’ (some messages are also categorized as ‘spam’). From these messages, the percentage of bullish messages and bearish messages are then calculated (based on the total number of messages).

Over the weekend, I ran a few backtests to see how well (or poorly) these signals worked as a trading signal. I ran these tests using the SPY ETF Social Percent Bearish and Social Percent Bullish indicators.

Trading Strategy – Using Social Percent as a trading signal

For the SPY ETF, I used the Social Percent Bullish and Social Percent Bearish indicators and took any extremes provided by these indicators as contrarian indicators.

To keep it simple, each trading strategy uses an ‘all-in/all-out’ approach and each considered as separate strategies with no insight from the other (for now).

A summary of the results of the strategies:

SPY Social Percent Bearish SPY Social Percent Bullish
Annual Return 12.57% 5.31%
Max Drawdown 7.78% 13.10%
Number of Trades 15 13
% Profitable 88% 54%

Social Percent Bearish

This strategy uses the following rules:

  • A buy signal is given when the SPY Social Percent Bearish indicator closes above 0.3. A buy order is placed at the open the day after a signal is generated.
  • A sell signal is given when the SPY Social Percent Bearish indicator closes below 0.2. A sell order is placed at the open the day after a signal is generated.
  • Commission is a percentage based on the size of the traded shares
  • Rather than use a set number of shares, this strategy uses all of the available cash to purchase shares.
  • Starting account size is $100K with no margin
  • Trading dates are: Dec 1 2011 to Jan 27 2017 (all available dates for our social sentiment indicator).

This contrarian trading strategy delivers an average annual return of 12.57% per year with 15 trades over the course of just over 5 years.  This strategy delivers 88% profitable trades and the average length of a trade is 61 days with the median duration of trade being 43 days. Maximum drawdown was 7.78%.

Trading and performance statistics are provided below.  Performance statistics provide backtest-data (in-sample) and out-of-sample data statistics.

Summary Stats - SPY Social Percent Bearish

Table 1: SPY Social Percent Bearish Summary Statistics

Summary Stats - SPY Social Percent Bearish Return Stats

Table 2: SPY Social Percent Bearish Return Statistics

SPY Social Percent Bearish Performance Statistics

Table 3: SPY Social Percent Bearish Performance Statistics

Table 4: SPY Social Percent Bearish Drawdown

Table 4: SPY Social Percent Bearish Drawdown

SPY Social Percent Bearish Performance Charts

Figure 1: SPY Social Percent Bearish Performance Chart

Social Percent Bullish

This strategy uses the following rules:

  • A buy signal is given when the SPY Social Percent Bullish indicator closes above 0.3. A buy order is placed at the open the day after a signal is generated.
  • A sell signal is given when the SPY Social Percent Bullish indicator closes below 0.2. A sell order is placed at the open the day after a signal is generated.
  • Commission is a percentage based on the size of the traded shares
  • Rather than use a set number of shares, this strategy uses all of the available cash to purchase shares.
  • Starting account size is $100K with no margin
  • Trading dates are: Dec 1 2011 to Jan 27 2017 (all available dates for our social sentiment indicator).

This contrarian trading strategy delivers an average annual return of 5.31% per year with 13 trades over the course 5 years and 1 month.  This strategy delivers 54% profitable trades and the average length of a trade is 86 days with the median duration of trade being 39 days. Maximum drawdown was 13.10%.

Trading and performance statistics are provided below.  Performance statistics provide backtest-data (in-sample) and out-of-sample data statistics.

SPY Social Percent Bullish Summary Statistics

Table 5: SPY Social Percent Bullish Summary Statistics

SPY Social Percent Bullish Return Statistics

Table 6: SPY Social Percent Bullish Return Statistics

SPY Social Percent Bullish Performance Statistics

Table 7: SPY Social Percent Bullish Performance Statistics

SPY Social Percent Bullish Drawdown Statistics

Table 8: SPY Social Percent Bullish Drawdown Statistics

SPY Social Percent Bullish Performance Charts

Figure 2: SPY Social Percent Bullish Performance Charts


2017-01-26 | Jason Goepfert | Comments

Among the major S&P 500 sectors, the two biggest winners so far year-to-date have been materials and information technology. Both have gained upwards of 5% already in 2017.

The push to multi-year highs in those sectors have been accompanied by a surge in their component stocks trading at 4-week, 12-week and 52-week highs. In both sectors, the surge in buying pressure have pushed nearly two-thirds of their component stocks to fresh 4-week highs, half to 12-week highs and a third to 52-week highs.

The tables below show the future performance in both the materials and info tech sectors after similar pushes to short-, medium-, and long-term new highs among the stocks that make up the indexes.

For the most part, returns were muted, especially in the shorter-term but in the case of materials, the next six months tended to be a tough slog. For info tech, the best returns were during the final blow-off in 1999-2000, and again in 2003 as the sector saw an initial thrust from the bear market low.

20170126_materials

20170126_tech


2017-01-25 | Jason Goepfert | Comments

Don Quixote: Dost not see? A monstrous giant of infamous repute whom I intend to encounter.
Sancho Panza: It’s a windmill.
Don Quixote: A giant. Canst thou not see the four great arms whirling at his back?
Sancho Panza: A giant?
Don Quixote: Exactly.

 

Pointing out any weakness lately has been an exercise in tilting at windmills. We can see something that according to the final arbiter, price, simply does not exist.

So like Don Quixote, let’s keep plugging along for now. The final figures are in for Tuesday’s push to new highs, and yet breadth continues to lag, even within the S&P 500 itself.

Looking at the percentage of S&P stocks above their 10-day, 50-day, and 200-day averages, fewer than 75% of them were above their averages. And fewer than 10% of the stocks made new 52-week highs along with the index itself.

20170125_divergence_nh

20170125_divergence_10

20170125_divergence_50

20170125_divergence_200   The last decade has been extremely strong for stocks (excluding 2008), so let’s look at the past 10 years and consider any day when the S&P 500 index closed at a 52-week high but fewer than 75% of stocks were above their short-, medium-, and long-term averages, and fewer than 10% closed at a 52-week high.

20170125_divergence_table

Even during this strong stretch, the few occurrences all led to meaningful weakness in the weeks and months ahead. The risk/reward was heavily skewed to the downside, with none of the occurrences traveling more than +1% over the next couple of weeks, while the average downside was nearly -2%. It got worse from there.

The biggest risk is simply that it doesn’t matter, like what happened in 2013. There are many factors that are completely different now from what we saw then, but our bottom line is always that when our models and indicators fail in the shorter-term, it tells us something about the longer-term. And those shorter-term studies that had been suggesting weakness are on the verge of outright failure. We’re still looking for these short-term gains to evaporate during a subsequent correction, but can’t wait forever.


2017-01-24 | Eric Brown | Comments

Over the weekend, we added an “Active Studies” page to the website.

This page lists all studies that are provided in the Daily Report that are still considered to be active. On this page, you can filter the listings by market/symbol and timeframe.

Additionally, this same Active Studies data has been added to the main user dashboard under the “Active Studies” tab.

A screenshot is provided below. You can access these active studies here or on the dashboard.

Active Studies Screenshot

Figure 1: Active Studies Screenshot

 


2017-01-18 | Eric Brown | Comments

Currently, there are 9 Stock indicators at Pessimistic Extremes and 44 Stock indicators at Optimistic Extremes.

The tables below display stock market indicators that are at Very Optimistic, Extremely Optimistic, Very Pessimistic or Extremely Pessimistic levels. Note: These tables contain only indicators from the Stocks section of the site. For the tables below, you can click through to each chart by clicking on the Chart name.

Pessimistic Extremes

Chart Last Close Last Update Sentiment
STEM.MR Model
14.0
2017-01-17
STEM.MR NASDAQ Model
17.0
2017-01-17
Number of IPOs
7.0
2016-12-30
Penny Stock Share Volume
72816200.0
2016-12-30
Penny Stock Dollar Volume
34629800.0
2016-12-30
Rydex Europe Assets
3.9
2017-01-17
Rydex Japan Assets
1.6
2017-01-17
Fund Flow – Mutual Fund Total
-12628.0
2017-01-04
Fund Flow – Mutual Fund Domestic
-10919.0
2017-01-04

Optimistic Extremes

Chart Last Close Last Update Sentiment
Smart Money / Dumb Money Confidence Spread
-54.0
2017-01-17
AIM (Advisor and Investor Model)
97.0
2017-01-13
% Showing Excess Pessimism
2.0
2017-01-17
% Showing Excess Optimism
44.0
2017-01-17
VIX
11.87
2017-01-17
VIX Term Structure
0.8
2017-01-17
NYSE High/Low Ratio
90.0
2017-01-17
Risk Appetite Index
89.0
2017-01-10
Equities as % of GDP
0.79
2016-09-30
Small Business Optimism
105.8
2016-12-30
Speculators Combo
94.0
2017-01-10
NASDAQ 100 Combo Hedgers Position
-16879300000.0
2017-01-10
DJIA Hedgers Position
-31276.0
2017-01-10
DJIA Mini Hedgers Position
-62552.0
2017-01-10
DJIA Combo Hedgers Position
-12420000000.0
2017-01-10
Russell 2000 Mini Hedgers Position
-90549.0
2017-01-10
Odd Lot Purchase Percentage
67.0327
2017-01-13
NAAIM Exposure Index
89.3
2017-01-11
Mutual Fund Cash Level
3.2
2016-11-30
Equity / Money Market Asset Ratio
4.06
2016-11-30
Retail Money Market Ratio
2.79
2016-12-26
NYSE Available Cash
-197961.0
2016-11-30
Penny Stock Transaction Volume
4984.0
2016-12-30
Rydex Ratio
77.0
2017-01-17
Rydex Beta Chase Index
5.8
2017-01-17
Rydex Money Market %
18.0
2017-01-17
Rydex Bull/Bear RSI Spread
100.0
2017-01-17
Rydex Total Bear Assets
138.0
2017-01-17
Rydex Total Bull / Bear Ratio
10.0
2017-01-17
Rydex Banking Assets
74.9
2017-01-17
Rydex Biotechnology Assets
304.1
2017-01-17
Rydex Consumer Products Assets
304.4
2017-01-17
Rydex Financial Services Assets
75.2
2017-01-17
Rydex Telecom Assets
60.7
2017-01-17
Smart Money Confidence
18.0
2017-01-17
Dumb Money Confidence
72.0
2017-01-17
Conference Board – Stocks
23.2
2016-12-30
% Showing Excess Optimism-Pessimism Spread
0.42
2017-01-17
QQQ Open Interest Ratio
2.1308
2017-01-17
IWM Open Interest Ratio
3.2888
2017-01-17
Fund Flow – ETF Total
11056.0
2017-01-04
Fund Flow – ETF Domestic
8852.0
2017-01-04
Medium-Term Risk Levels
7.0
2017-01-17
Rydex Total Leveraged Bear Assets
53.6
2017-01-17

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